Oil lobby backs tax plan, business leaning against

Published: Wednesday, March 27, 2013 at 8:21 p.m.

Last Modified: Wednesday, March 27, 2013 at 8:21 p.m.

BATON ROUGE — The state's largest energy lobby has reached a compromise with Gov. Bobby Jindal's administration that offers it some protections from his proposed tax swap plan.

The Louisiana Association of Business and Industry, meanwhile, announced Wednesday that it will oppose the plan if it remains in its current form.

During the regular session that begins April 8, Jindal will ask the Legislature to eliminate personal and corporate income taxes in exchange for a more robust sales tax base, which includes removing some existing exemptions. The sales tax would increase from 4 percent to 5.88 percent.

Don Briggs, president of the Louisiana Oil and Gas Association, said the agreement involves how to re-structure the severance tax and sales tax incentives that currently apply to the energy industry. The severance tax is levied by the state on the extraction and use of a natural product, such as oil, that is sold outside the state.

Support from companies involved in oil and natural gas work, though, is not unilateral.

“We believe the proposal we have discussed with the administration will create more jobs in the oil and gas industry for Louisianans,” Briggs said. “The upstream sector of the industry that LOGA represents is supportive of the tax swap, however the midstream/downstream sectors are continuing to evaluate the plan.”

Following several conversations, Briggs said the administration has indicated the oil and natural gas service sector would remain exempt from the sales tax on services.

But restructuring severance tax exemptions appears to still be on the table.

“This is good news,” he added.

Briggs said the Louisiana Oil and Gas Association has also worked with the administration to retain and modify certain exemptions that are on the books.

“While a specific tax plan bill has not been drafted or filed at this time, the oil and gas industry certainly looks forward to reviewing the bill,” he said.

A request for confirmation on the deal from Doug Baker, Department of Revenue spokesperson, was unsuccessful.

When the plan's details first surfaced earlier this month, administration officials told lawmakers that the oil and gas industry would lose about $289 million worth of existing tax exemptions related to extraction, which is the practice of removing natural resources from the ground and other subsurface materials.

Shortly before the Louisiana Oil and Gas Association made its announcement Wednesday, the Louisiana Association of Business and Industry took one step closer to finalizing its stance as well.

“LABI's policy is clear,” said President Dan Juneau. “If the tax swap proposal is introduced as a net increase in business taxes or is amended during the legislative process to take that form, LABI will oppose it.”

Department of Revenue Executive Counsel Tim Barfield, who has been charged with guiding Jindal's plan, told lawmakers recently that $500 million in costs will be shifted to businesses under the legislation that will soon be introduced.

“That number is probably higher today and undoubtedly will go up significantly in the future,” Juneau wrote in his weekly column for the Louisiana Association of Business and Industry members and newspapers.

The regular session is scheduled to adjourn June 6.

Jeremy Alford can be reached at jeremy@jeremyalford.com.

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